Telkom, which operates Openserve and Telkom Consumer, said yesterday that the hefty mobile service revenue growth pushed its subscribers 85.9 percent to 9.7 million during the period. Photo: Thobile Mathonsi/African News Agency (ANA)

Telkom easily outperforms competitors

By Dineo Faku May 28, 2019

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JOHANNESBURG – Telkom gained nearly 7 percent on the JSE yesterday after the group said that it added 4.5 million new active subscribers in the year to end-March, with mobile revenue outperforming its MTN and Vodacom rivals, which buckled on fierce competition.

Telkom, which operates Openserve and Telkom Consumer, said yesterday that the hefty mobile service revenue growth pushed its subscribers 85.9 percent to 9.7 million during the period.

The company's share has gained 9.85 percent in five days.

Telkom said it cut its permanent workforce by 13 percent to 15 296 during the period as employees opted for voluntary severance retirement and retrenchment packages at a cost of R728 million.

Telkom said group operating revenue grew 5.3 percent to R41.8 billion from R39.6bn in 2018, mainly driven by a 58.3 percent increase in mobile service revenue to R8.5bn from R5.1bn in 2018.

It said data revenue jumped 34.7 percent to R8.9bn, buoyed mainly by the 60.7 percent mobile data revenue growth to R5.9bn from R3.6bn in 2018 on the back of the company’s strategy to focus on data, which led to an increase in mobile data traffic.

Headline earnings a share increased by 5.1 percent to 619.2 cents per share on higher earnings before interest, tax, depreciation and amortisation, which increased by 8.5 percent to R11.3bn.

Chief executive Sipho Maseko said the growth came as the partly state-owned company planned to position itself as the biggest network in the country.

“Despite adding 4.5 million subscribers in the year, our blended average revenue per user was stable at R100. Prepaid subscribers more than doubled, compared to the prior year, increasing by 109.3 percent to 7.8 million from 3.7 million in 2018,” Maseko said.

Late last year, Telkom signed a major roaming agreement with Vodacom to allow customers to roam on Vodacom’s 2G, 3G and 4G network.

“We are between 50 to 80 percent complete with the implementation of the agreement,” Maseko said. “The agreement gives us a national footprint and will reverse the negative feedback on our voice offering.”

He said Telkom’s strategy to separate its property and mast and tower portfolio to unlock value had also gained momentum.

“We have set aside properties to redevelop. On Wednesday (tomorrow), we will be hosting investors to talk about how to unlock business in the property business,” he said.

Ofentse Dazela, a director of pricing research at Africa Analysis, said Telkom had showed a healthy growth trajectory. “This phenomenal growth has pushed service revenue up by a massive 58.3 percent. Notably, these numbers come at a time when its competitors are experiencing subdued growth,” Dazela said.

Earlier this month, Vodacom said that it was curtailed by data pricing, a weak economic environment and fierce competition from its rivals.

Vodacom said the reduction in out-of-bundle tariffs contributed to a 37 percent decline in effective data prices since the end of March 2018.

Africa's biggest telecommunications company, MTN, said it had lost 1.2 million South African subscribers in the quarter ended March to 30 million from 31.2 million at the end of December.

Dazela said Telkom’s data revenue remained the key revenue driver for this subsidiary, with the fixed LTE packages and FreeMe postpaid packages continuing to experience good market reception.

“From a bird's eye view, one can actually argue that Telkom is not losing fixed broadband subscribers per se, but it is actually expediting customer migration from obsolete technologies such as ADSL to its next-generation networks like LTE, LTE-Advanced and Fibre,” said Dazela.